What follows is our general observations and opinions. It is not legal advice, and it is not a definitive statement of California law. Every situation depends on its own facts.
A relocation clause lets the landlord move your business to different space in the same project. A demolition clause lets the landlord terminate the lease outright so the building can be redeveloped. Both are common in older Los Angeles shopping centers and office buildings, both are usually buried in the miscellaneous provisions near the back of the lease, and in our experience both are far more negotiable at letter of intent stage than most tenants realize.
Our view is that these two clauses deserve more attention than they normally get, because they are the provisions most likely to undo the entire economic case for a deal. A tenant who spends three hundred thousand dollars building out a restaurant on a ten-year lease has made that investment on the assumption of ten years in that specific location. A demolition clause exercisable on nine months’ notice in year three changes the arithmetic completely, and it does so without the landlord breaching anything.
Why Los Angeles landlords ask for them
The Los Angeles commercial stock includes a great deal of low-density, older product sitting on land that is worth considerably more than the improvements on it. Strip centers along major corridors, single-story office buildings, and older mixed-use blocks near transit are all candidates for redevelopment, particularly where the parcel has upzoning potential or sits inside a transit-oriented incentive area. A landlord assembling a redevelopment site needs to be able to deliver vacant possession. A demolition clause is how that gets done.
Relocation clauses have a different driver. A landlord leasing a multi-tenant building wants the flexibility to accommodate an expanding anchor, to consolidate vacancy into contiguous blocks, or to re-merchandise a center. Moving a smaller tenant is how that flexibility is exercised.
Neither motivation is illegitimate. But the cost of that flexibility should sit with the party that benefits from it, and as drafted it usually does not.
What a relocation clause typically says, and what it leaves out
The landlord-form version usually gives the landlord the right to relocate the tenant to other space in the project on some notice period, with the landlord paying “reasonable moving expenses”. That sounds fair until it is unpacked. What we look for, and what is usually missing:
- Comparability. Is the substitute space required to be comparable in size, configuration, frontage, visibility, floor and access — or merely comparable in square footage? For a retail or restaurant tenant, frontage and foot traffic are the asset. Equivalent square footage at the back of a center is not equivalent space.
- Who pays for what. “Moving expenses” rarely covers the real cost: rebuilding tenant improvements to the same standard, new signage, permits, reprinting collateral and stationery, updating every listing and directory entry, telecom and point-of-sale reinstallation, and lost revenue during the closure.
- Rent adjustment. Rent should not simply carry across. If the new space is smaller, or worse, the rent should follow.
- Notice. Thirty days is common in landlord forms and is not workable for a business that needs to permit and build.
- A tenant termination right. Our preferred position: if the landlord exercises relocation, the tenant may instead terminate without penalty within a stated window. That single provision reframes the negotiation, because it makes relocation expensive for the landlord rather than free.
Demolition clauses are the sharper risk
A demolition or redevelopment clause is not a relocation right. It ends the lease. The typical landlord form allows termination on notice if the landlord elects to demolish or substantially renovate the building, sometimes with no compensation to the tenant at all.
The points we press on hardest:
A blackout period. No exercise before a stated date — often coordinated with the tenant’s amortization of its build-out. A tenant that has spent heavily on improvements should get a protected initial term long enough to earn that money back.
Real notice. Twelve months is a more realistic minimum for a tenant that needs to find space, negotiate a lease, permit through LADBS and build. Restaurant and medical uses often need longer, because the permitting path is longer.
A termination payment. Unamortized tenant improvement cost is the honest measure, and it can be calculated straight-line over the initial term. Some tenants can also negotiate a moving allowance or a payment tied to remaining term.
Genuine intent, not pretext. The clause should be exercisable only where the landlord has a real redevelopment plan, ideally evidenced by a filed application. Without that, a demolition clause is functionally a right to terminate any tenant at will, which is not what the tenant priced.
A right of first offer on the new project. Rarely granted, occasionally granted to a strong tenant, and worth asking for.
Where these clauses interact with the rest of the lease
These provisions do not sit in isolation, and reading them alone is a mistake we see regularly.
If the lease contains a personal guarantee, a demolition termination should release the guarantor as well. If the tenant has an option to renew, the interaction needs to be explicit — a landlord should not be able to accept an option exercise and then terminate for demolition a month later. If there is a percentage rent structure tied to a co-tenancy requirement, relocation to a weaker position in the center may trigger it. And if the tenant has exclusivity in the center, that exclusivity should follow the tenant to the substitute premises.
Being candid about leverage
We would not tell any tenant that these clauses can always be fixed. Leverage is what it is. A national credit tenant taking twenty thousand square feet can usually strike a demolition clause outright. A small operator taking twelve hundred square feet in a well-located center will often not be able to remove it, and the realistic goal becomes softening it: a blackout period, longer notice, and a payment for unamortized improvements.
Even where the clause survives largely intact, knowing it is there changes decisions a tenant makes afterwards. It affects how much to spend on build-out, whether to amortize equipment over five years or ten, and whether to take the option term. In our experience a tenant who understands the clause makes better commercial decisions than one who discovers it when the notice arrives.
How we work on these
Commercial lease review and negotiation is hourly or flat-fee work, and we normally quote a flat fee for a first-pass review and a marked-up lease so a tenant knows the cost before starting. This is not contingency work and we would not present it as such. Reviewing a relocation and demolition clause before signing costs a fraction of what it costs to deal with the consequences afterwards.
If you are looking at a Los Angeles lease with a relocation or demolition provision in it, we are glad to read it with you. Call us at (310) 556-9692.
Related reading: our commercial lease review resource page, plus tenant improvement allowances and what happens if you leave early, assignment and subletting provisions, and holdover rent and staying past the term.
These are our general observations and opinions only. They are not legal advice and not a definitive statement of California law, every situation turns on its own facts, and reading this does not create an attorney-client relationship between us.
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